IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria
IMF News, February 8, 2023
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- Published: February 8, 2023
Economic performance and recent developments
- Nigeria’s economy recouped output losses sustained during the COVID-19 pandemic, supported by favorable oil prices and buoyant consumption activities.
- Real GDP (adjusted for inflation) has reached its pre-crisis level; Q3 2022 marked the eighth consecutive quarter of positive growth.
- Growth is estimated at 3 percent for 2022.
- Production of crude oil in 2022: 1.42 million barrels per day.
- Nominal GDP at market prices in 2022: 206.6 trillion naira.
Inflation and monetary policy
- Headline inflation (CPI, end of period) declined in December 2022 for the first time in 11 months but remained high at 21.3 percent.
- Drivers of high inflation: elevated international food prices, large parallel market premiums, and monetary policy accommodation.
- The Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR) by a cumulative 500 basis points in 2022 and another 100 bps in January 2023.
- Inflation remains above the MPR.
- Directors urged decisive and effective monetary policy tightening and encouraged the CBN to be ready to further increase the policy rate if needed.
- Additional recommended actions for the CBN: fully sterilize central bank financing of fiscal deficits, phase out credit intervention programs, strengthen CBN independence, and establish price stability as its primary objective.
- Directors emphasized that the CBN’s budget financing should strictly adhere to statutory limits and urged finalizing securitization of the CBN’s existing stock of overdrafts.
Fiscal position, public debt, and subsidies
- Despite rising oil prices, the general government fiscal deficit is estimated to have widened further in 2022, mainly due to high fuel subsidy costs.
- Directors highlighted the need for bold fiscal reforms to create policy space, put public debt on sound footing, and reduce vulnerabilities.
- Directors urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023 and to increase well-targeted social spending.
- Revenue mobilization priorities: tax administration reforms, expanding the tax automation system, strengthening taxpayer segmentation, and improving tax compliance.
- Medium-term fiscal recommendations: modernize customs administration, rationalize tax incentives, and raise tax rates to the levels of the Economic Community of West African States (ECOWAS).
- Public gross debt (2022): 37.3 percent of GDP.
- Of which: FGN debt (2022): 32.9 percent of GDP.
- Of which: External debt (2022): 8.7 percent of GDP.
- FGN interest payments (percent of FGN revenue) in 2022: 96.3 percent.
- Interest payments (percent of consolidated revenue) in 2022: 27.4 percent.
- Total revenues and grants (2022): 8.4 percent of GDP.
- Total expenditure and net lending (2022): 14.6 percent of GDP.
- Of which: fuel subsidies (2022): 1.3 percent of GDP.
- Overall balance (2022): -6.2 percent of GDP.
- Non-oil primary balance (2022): -7.5 percent of GDP.
- Non-oil revenue (2022): 4.9 percent of GDP.
External sector and reserves
- Current account balance (2022): 0.1 percent of GDP (an estimated improvement in 2022).
- Foreign currency reserves declined amidst capital outflow pressures.
- Gross international reserves (2022): US$37.5 billion (equivalent months of imports of G&Ss: 6.2).
- External debt outstanding (2022): US$115.8 billion.
- Price of Nigerian oil (2022): US$100.5 per barrel.
- Exports of goods and services (2022): 39.5 percent (annual percentage change).
- Imports of goods and services (2022): 21.0 percent (annual percentage change).
Financial sector and governance
- Directors welcomed the resilience of the banking sector and encouraged increased vigilance given potential risks from dynamic retail credit growth.
- Need to enhance the effectiveness of the AML/CFT framework and to avoid public listing by the FATF.
- Ongoing efforts to foster financial inclusion, including through the use of mobile money with appropriate regulation and supervision, were welcomed.
- Directors urged governance reforms, including delivering on commitments from the 2020 Rapid Financing Instrument, improving transparency and accountability in the oil sector, and strengthening the agricultural sector for job creation and food security.
Risks and outlook
- Near-term outlook faces downside risks; medium-term upside risks exist.
- Downside risks: higher international food and fertilizer prices, continued widening of the parallel market premium (which could de-anchor inflation expectations), oil sector production and price volatility, climate-related natural disasters (e.g., floods) affecting agricultural production, and further widening in sovereign premia increasing debt servicing costs.
- Medium-term upside risks: potential stronger reform momentum and a larger-than-expected rebound in oil and gas production.
Executive Board assessment and policy recommendations
- Executive Directors agreed with the thrust of the staff appraisal and welcomed the broadening of Nigeria’s economic recovery but noted missed opportunities to reap benefits from higher global oil prices.
- Recommended policy mix: decisive fiscal and monetary tightening to secure macroeconomic stability, combined with structural reforms to improve governance, strengthen the agricultural sector, and boost inclusive, sustainable growth.
- Exchange rate policy: Directors encouraged continued move toward a unified and market-clearing exchange rate by dismantling various exchange rate windows at the CBN, and providing clarity on exchange rate policy to boost investor confidence, quell capital outflow pressures, and rebuild buffers.
- Directors welcomed Nigeria’s intention to participate in the African Continental Free Trade Agreement.
- It is expected that the next Article IV consultation with Nigeria will be held on the standard 12-month cycle.
Key numerical projections and statistics (selected)
- Real GDP (annual percentage change): 2020: -1.8; 2021: 3.6; 2022: 3.0; 2023: 3.2
- Oil and Gas GDP (annual percentage change): 2020: -8.9; 2021: -8.3; 2022: -8.2; 2023: 5.6
- Non-oil GDP (annual percentage change): 2020: -1.1; 2021: 4.7; 2022: 3.8; 2023: —
- Non-oil non-agriculture GDP (annual percentage change): 2020: -2.4; 2021: 5.7; 2022: 4.5; 2023: 3.7
- Production of crude oil (million barrels per day): 2020: 1.77; 2021: 1.62; 2022: 1.42; 2023: 1.51
- Nominal GDP per capita (US$): …
- GDP deflator (annual percentage change): 2020: 7.8; 2021: 10.1; 2022: 14.0; 2023: 10.6
- Consumer price index (annual average): 2020: 13.2; 2021: 17.0; 2022: 18.8; 2023: 17.4
- Consumer price index (end of period): 2020: 15.8; 2021: 15.6; 2022: 21.3; 2023: 15.1
- Gross national savings (percent of GDP): 2020: 23.0; 2021: 25.2; 2022: 23.4; 2023: —
- Investment (percent of GDP): 2020: 26.7; 2021: 25.6; 2022: 23.3; 2023: 21.6
- Current account balance (percent of GDP): 2020: -3.7; 2021: -0.4; 2022: 0.1; 2023: -0.3
- Public gross debt (percent of GDP): 2020: 34.5; 2021: 36.5; 2022: 37.3; 2023: 38.2
- Broad money (percent change; end of period): 2020: 11.6; 2021: 14.2; 2022: 20.3; 2023: 20.5
- Credit to the private sector (y-o-y,%): 2020: 25.9; 2021: 25.0; 2022: 13.8; 2023: —
- Exports of goods and services (annual percentage change): 2020: -42.9; 2021: 27.1; 2022: 39.5; 2023: -9.6
- Imports of goods and services (annual percentage change): 2020: -28.4; 2021: -8.4; 2022: 21.0; 2023: -3.3
- Terms of trade (annual percentage change): 2020: -19.6; 2021: 22.6; 2022: 13.9; 2023: -7.1
- Price of Nigerian oil (US dollar per barrel): 2020: 43.3; 2021: 70.8; 2022: 100.5; 2023: 88.6
- External debt outstanding (US$ billions): 2020: 105.0; 2021: 111.9; 2022: 115.8; 2023: 121.6
- Gross international reserves (US$ billions): 2020: 40.2; 2021: 36.9; 2022: 37.5
IMF Communications Department. Press Release No. 23/34. February 8, 2023.
